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The results from the latest AAII Sentiment Survey show optimism about the short-term direction of the stock market falling below 20% for the first time in nine weeks. At the same time, pessimism rose to an 11-week high.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 3.8 percentage points to 18.1%. Optimism was last lower on April 28, 2022 (16.4%). This is the 25th lowest weekly reading in the survey’s 35-year history. The pullback keeps bullish sentiment below its historical average of 38.0% for the 42nd consecutive week.
Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, increased 1.0 percentage points to 28.7%. Neutral sentiment is below its historical average of 31.5% for the 18th time in 20 weeks.
Bearish sentiment, expectations that stock prices will fall over the next six months, rose 2.9 percentage points to 53.3%. Bearish sentiment is above its historical average of 30.5% for the 41st time out of the past 42 weeks and is at an unusually high level for the 26th time out of the last 34 weeks. The breakpoint between typical and unusually high readings is currently 40.5%.
The bull-bear spread (bullish minus bearish sentiment) is -35.2% and is unusually low for the 27th time in 33 weeks. The breakpoint between typical and unusually low readings is currently -10.9%. The bull-bear spread has also broken its second-longest streak of negative readings, as sentiment has remained in favor of bears for the 23rd week in a row.
Historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment and the bull-bear spread. The S&P 500 has also realized above-average and above-median returns following unusually high levels of pessimism.
Continued volatility in the major stock indexes along with inflation, corporate earnings and increased chatter about the possibility of a recession are all likely weighing on individual investors’ short-term expectations for the stock market. Also influencing sentiment are monetary policy, politics and the ongoing invasion of Ukraine by Russia.
This week’s AAII Sentiment Survey results:
- Bullish: 18.1%, down 3.8 percentage points
- Neutral: 28.7%, up 1.0 percentage points
- Bearish: 53.3%, up 2.9 percentage points
Historical averages:
- Bullish: 38.0%
- Neutral: 31.5%
- Bearish: 30.5%
The AAII Sentiment Survey has been conducted weekly since July 1987. The survey and its results are available online.
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